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Case 8:12-cv-02321-JSM-MAP Document 26 Filed 01/08/13 Page 1 of 12 PageID 150

UNITED STATES DISTRICT COURT


MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

TRADITIONS SENIOR Case No. 8:12-cv-2321-JSM-MAP


MANAGEMENT, INC.,

Plaintiff,

vs.

UNITED HEALTH ADMINISTRATORS,


INC., d/b/a UNITED HEALTH PLUS,
GARDEN STATE HEALTHCARE ADMINISTRATORS, INC.,
JOSEPH SCHWARTZ, an individual, and
OXFORD COVERAGE, INC.

Defendants.

_______________________________________/

PLAINTIFF’S FIRST AMENDED COMPLAINT AND


DEMAND FOR JURY TRIAL

The Plaintiff, TRADITIONS SENIOR MANAGEMENT, INC., a Nevada corporation,

hereby files this its Amended Complaint and Demand for Jury Trial against UNITED HEALTH

ADMINISTRATORS, INC., d/b/a UNITED HEALTH PLUS, GARDEN STATE

HEALTHCARE ADMINISTRATORS, INC., JOSEPH SCHWARTZ, and OXFORD

COVERAGE, INC., and states:

Jurisdiction and Venue

1. This Court’s jurisdiction is invoked pursuant to 28 U.S.C. § 1332, as there is

diversity of citizenship between the Plaintiff and Defendants, and the amount

in controversy exceeds $75,000.00 exclusive of interest and costs. This Court

has personal jurisdiction over all Defendants including the individual

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Defendant, JOSEPH SCHWARTZ, as they have personally availed

themselves of the privilege of conducting activities within the forum state

such that they would reasonably anticipate being personally haled into a

Florida court.

2. Venue is proper in the Middle District of Florida and the Tampa Division

pursuant to 28 U.S.C § 1391 in that the events, actions and omissions giving

rise to this cause occurred in the Tampa Division of the Middle District.

Parties

3. Plaintiff, TRADITIONS SENIOR MANAGEMENT, INC., (“TSM”) is a

Nevada corporation that manages health care facilities throughout Florida and

other states.

4. Defendant, UNITED HEALTH ADMINISTRATORS, INC., d/b/a UNITED

HEALTH PLUS (“UHP”) is a New York corporation. David Rubinstein

(“Rubinstein”) is an individual residing in New York and the president of

UHP.

5. Defendant, GARDEN STATE HEALTH CARE ADMINISTRATORS, INC.,

(“GARDEN”) is a New York corporation.

6. Defendant, OXFORD COVERAGE, INC., (“OXFORD”) is a New Jersey

corporation.

7. Defendants UHP, GARDEN, AND OXFORD operate as third party insurance

administrators.

8. Defendant, JOSEPH SCHWARTZ (“SCHWARTZ”) is an individual residing

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in the state of New York. SCHWARTZ is the president of GARDEN and the

president of OXFORD.

9. SCHWARTZ has maintained a fiduciary relationship with TSM as its

insurance broker and agent since 2002. SCHWARTZ provided insurance and

insurance consulting services to TSM since calendar year 2002.

10. In the first half of 2009 and in the midst of upcoming health insurance

changes and cost increases, TSM endeavored to maintain health insurance for

the employees of the health facilities it managed.

11. TSM, through its chairman of the board, Ben Atkins, sought the advice of its

trusted broker, SCHWARTZ. SCHWARTZ advised TSM to “go self-insured”

like other clients. TSM told SCHWARTZ that it did not want to take the risk

of a self-insurance program.

12. In turn, SCHWARTZ travelled to TSM’s Clearwater office and offered an

arrangement whereby SCHWARTZ, personally, and his affiliated companies

would take the risk of loss and also all the benefits of being self-insured. The

risk would be the responsibility to pay covered health claims to the extent they

exceed the premiums paid by TSM. The benefit would be the retention of

premiums to the extent they exceed the amounts paid on covered health

claims. The cost to TSM would be similar to premiums charged by Aetna and

other like health insurers. SCHWARTZ’ and his affiliated companies would

act as trustee for premium payments to ensure payment of covered health

claims. This arrangement was verbally described by SCHWARTZ and is

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hereinafter referred to as the “Schwartz Self Insurance Program.”

13. TSM accepted the Schwartz Self Insurance Program as described above. In

furtherance of the Schwartz Self Insurance Program, Rubinstein travelled and

met with employees of health facilities that TSM managed, explained the

health insurance benefits, and provided health insurance cards to employees.

14. In furtherance of the Schwartz Self Insurance Program, UHP, GARDEN,

AND OXFORD acted as third party insurance administrators and were

entrusted with premiums paid by TSM for the purpose of paying covered

employee health insurance claims.

15. UHP undertook the fiduciary responsibility of processing and paying health

benefits directly to the employees’ health providers. GARDEN undertook the

fiduciary responsibility to receive the premiums and ensure proper distribution

for payment of employee health claims. OXFORD and SCHWARTZ

undertook the fiduciary responsibility as indemnifiers to pay covered health

claims to the extent they exceeded the premiums paid by TSM.1

16. TSM and the health facilities it managed paid premiums in excess of $4.7

million for employee health benefits for the months between September 1,

2009 through August 1, 2011.

17. In addition to the premiums received, the Defendants received proceeds from

a stop loss insurance policy.2

1 To the extent premiums exceeded covered employee health claims, these Defendants would receive the
benefit of the surplus.
2 To lessen the risk it undertook, the corporate Defendants purchased stop loss insurance to provide coverage

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18. By early summer 2011, TSM became aware that legitimate employee health

claims were not being processed or paid. Some claims were over a year old. A

majority of the claims were several months old. At that time, the aggregate

claims approached $1million. As a result, TSM demanded information. TSM

also questioned the failure to pay claims when sufficient premiums had been

paid to cover the health claims. Rubinstein replied that SCHWARTZ took

dollars representing premiums paid by TSM.

19. TSM demanded that UHP, GARDEN, and OXFORD process and pay the

covered claims. Defendants initially promised to do so but subsequently failed

and refused without explanation.

20. The amount of the unprocessed and unpaid claims became so large that TSM

requested the claims documentation so that TSM, at its own cost and to mitigate

damages, could pay health claims for employees who were damaged due to non-

payment. TSM has paid over $700,000 in employee health claims which were the

responsibility of the Defendants.

21. In contravention of the Schwartz Self Insured Program, UHP, GARDEN, and

OXFORD:

a) ignored health insurance claims which led to collection action by

health care providers;

b) failed to process over $1 million in health insurance claims in a

timely manner;

for qualified employee health claims.

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c) retained premiums without paying covered health claims;

d) diverted and/or condoned the diversion of premiums to

SCHWARTZ without paying covered health claims; and

e) failed to pay covered health claims in an amount exceeding $1

million despite receipt of premiums that exceeded the dollar

amount of the claims.

22. Despite demand, the Defendants have refused to return any of the premium

payments which they have improperly withheld and diverted. And, there remain

over 500 unpaid health claims which the Defendants are required to pay but still

refuse.

23. Prior to the filing of this complaint, all conditions precedent have been performed

by TSM, waived, or excused.

COUNT I – Breach of Fiduciary Duty Against SCHWARTZ

24. TSM realleges and reincorporates paragraphs 1 through 23 as though fully set

forth herein.

25. This claim is against SCHWARTZ for breach of fiduciary duty.

26. SCHWARTZ and TSM had a fiduciary relationship for over a decade.

SCHWARTZ served TSM as a trusted and experienced broker and insurance

consultant since calendar year 2002. TSM depended on SCHWARTZ for advice

and protection regarding TSM’s insurance needs and specifically, the Schwartz

Self Insurance Program.

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27. While using this relationship of trust and confidence to his advantage,

SCHWARTZ influenced TSM to accept the Schwartz Self Insurance Program.

TSM reposed confidence and trust in SCHWARTZ when it provided over $4

million to be disbursed and handled under the guidance and direction of

SCHWARTZ.

28. SCHWARTZ undertook to advise and counsel TSM regarding the Schwartz Self

Insurance Program. He, personally, made the decisions regarding disbursement

of the premiums paid by TSM.

29. This fiduciary relationship required SCHWARTZ to act with candor, good faith,

and fair dealing toward TSM. Instead, SCHWARTZ obfuscated and concealed

material facts.

30. SCHWARTZ acquired and abused TSM’s trust and has caused TSM damages

by:

a) intentionally diverting premiums paid by TSM to himself, and

b) intentionally leaving scarce the pot necessary to pay employee

health claims.

31. SCHWARTZ’ actions were undertaken willfully and in conscious disregard for

the rights of TSM.

WHEREFORE, TSM prays for entry of Judgment in its favor and against

Defendants for damages, punitive damages, costs, interest, and such other remedies this

Court deems just and appropriate.

COUNT II – Breach of Fiduciary Duty Against UHP, GARDEN, and OXFORD

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32. TSM realleges and reincorporates paragraphs 1 through 23 as though fully set

forth herein.

33. This claim is against UHP, GARDEN, and OXFORD for breach of fiduciary

duty.

34. UHP, GARDEN, and OXFORD, on one hand, and TSM, on the other hand,

established a fiduciary relationship. This relationship required these Defendants

to act with candor, good faith, and fair dealing toward TSM. Instead, these

Defendants failed to disclose material facts.

35. SCHWARTZ, president of GARDEN and OXFORD and affiliated with UHP,

served TSM as a trusted and experienced broker and insurance consultant since

calendar year 2002. TSM depended on SCHWARTZ for advice and protection

regarding TSM’s insurance needs and specifically, the Schwartz Self Insurance

Program.

36. While using this relationship of trust and confidence to his advantage,

SCHWARTZ influenced TSM to accept the services of UHP, GARDEN, and

OXFORD in connection with the Schwartz Self Insurance Program.

37. In addition, Rubinstein, president of UHP, influenced and advised TSM to accept

the Schwartz Self Insurance Program. In turn, TSM reposed confidence and trust

in UHP, GARDEN, and OXFORD when it provided them over $4 million to be

disbursed for the purpose of paying employee health claims.

38. After acquiring TSM’s trust, UHP, GARDEN, and OXFORD undertook duties to

handle and disburse premiums paid by TSM.

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39. UHP, GARDEN, and OXFORD abused TSM’s trust and has caused TSM

damages by:

a) condoning and/or participating in the diversion of premiums paid

by TSM to SCHWARTZ, and

b) failing to disclose the diversion of premiums to SCHWARTZ,

c) failing to disclose the failure to process and pay employee health

claims,

d) failing to retain premiums for the purpose of paying employee

health claims, and

e) failing to process and pay employee health claims.

WHEREFORE, TSM prays for entry of Judgment in its favor and against

Defendants for money damages, costs, interest, and such other remedies this Court deems

just and appropriate.

COUNT III – Unjust Enrichment Against All Defendants

40. TSM realleges and reincorporates paragraphs 1 through 23, 26 through 30, and

34 through 39 as though fully set forth herein.

41. TSM has conferred benefits on Defendants through TSM’s payment of

premiums.

42. Defendants voluntarily accepted and retained the benefits conferred.

43. Defendants purposefully retained these benefits while ignoring and failing to pay

employee health claims as promised.

44. As such, Defendants have been unjustly enriched at the expense of TSM.

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45. The circumstances render Defendants’ retention of the premiums inequitable.

46. TSM is entitled to damages as a result of Defendants unjust enrichment including

disgorgement of all monies accepted which were not utilized for payment of

employee health claims.

WHEREFORE, TSM prays for an order imposing a constructive trust on all

premiums paid by TSM and under the control of Defendants, for an entry of Judgment in its

favor and against Defendants for money damages, costs, interest, and such other remedies

this Court deems just and appropriate.

COUNT IV – Common Law Indemnity Against All Defendants

47. Plaintiff realleges and reincorporates paragraphs 1 through 23, 26 through 30,

and 34 through 39 as though fully set forth herein.

48. Through the course of TSM’s relationship with Defendants, TSM entrusted

Defendants with its premiums and Defendants owed TSM the duty to pay

covered employee health claims and in a timely manner.

49. When Defendants failed to cover employee health claims, TSM paid over

$700,000 to cover such claims that should have been processed and paid by

Defendants.

50. TSM operates as the management company for certain health care facilities. TSM

paid these employee health claims in connection with its duties as manager. TSM

discharged these duties which should have been wholly discharged by

Defendants. TSM paid these claims after Defendants refused to cover them and

even though these claims were the sole responsibility of Defendants.

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51. TSM is wholly without fault and the sole parties at fault were Defendants who

wrongly withheld monies owed for the payment of covered employee health

claims.

WHEREFORE, TSM prays for entry of Judgment in its favor and against

Defendants to indemnify it and reimburse TSM for all monies paid by TSM and the facilities

it managed to cover employee health claims, for money damages related thereto, costs,

interest, and such other remedies this Court deems just and appropriate.

COUNT V – Equitable Accounting Against All Defendants

52. TSM realleges and reincorporates paragraphs 1 through 23, 26 through 30, and

34 through 39 as though fully set forth herein.

53. This is an action for equitable accounting against all Defendants.

54. This matter involves extensive and complicated accounts. Any remedy at law is

inadequate and not as expeditious as it is in equity.

55. TSM has a right to an accounting based upon the fiduciary relationship between

the parties.

56. An accounting is necessary to determine the exact amounts paid by the

Defendants to cover employee health claims, the exact amounts diverted to others

including SCHWARTZ, and the exact amounts due to TSM.

WHEREFORE, TSM prays for an order declaring TSM’s right to an accounting; an

order requiring the Defendants to produce all documents relating to (a) accounts which

received premiums paid by TSM, (b) accounts which made payment of employee health

claims, and (c) all other accounts of Defendants to render a full accounting; an order

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requiring the Defendants to account for all payments of employee health claims; an order

awarding costs and damages relating to an accounting, and all other remedies this Court

deems just and appropriate.

Demand for Jury Trial

The Plaintiff hereby demands a jury trial on all issues so triable.

______/s/_Shirin M. Vesely, Esq._______________


Shirin M. Vesely, Esq.
Keane, Reese,Vesely & Gerdes, P.A.
Trial Counsel
PO Box 57
St. Petersburg, FL 33701
FBN: 021156
(727)823-5000 Fax: (727)894-1023
Primary email: svesely@krv-lawfirm.com
Secondary email: efiling@krv-lawfirm.com

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on the 8th day of January, 2013, I electronically filed the

foregoing with the Clerk of Court using the CM/ECF system which will send a notice of

electronic filing to: Marion Hale, Esq., (marion@jpfirm.com and sharonk@jpfirm.com) and

William Ignatuck, Esquire, (wignatuck@traditionsmanagement.net), and a true and correct

copy of the foregoing has been furnished by email directly to: Marion Hale, Esq.,

marion@jpfirm.com and sharonk@jpfirm.com) and William Ignatuck, Esq.

(wignatuck@traditionsmanagement.net).

______/s/_Shirin M. Vesely, Esq._______________


Shirin M. Vesely, Esq.

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